Business opportunities and insights for the underserved parts of China…

Ogilvy & Mather has published a report on China’s 4th-6th tier cities (hat tip littleredbook) that may be useful for the China entrepreneur looking beyond China’s already well-developed first and second tier metropolitan markets. Keep in mind that many of these cities are still larger and more populous than the vast majority of Western cities. The market is there, but tapping that market successfully has been hit or miss for many. Maybe this report can guide you in the right direction. Some excerpts to whet your appetite:

China’s 4th-6th tier towns, which account for 37% of China’s population, have notably different consumer cultures and retail landscapes not only from the major metropolises of Beijing, Shanghai and Guangzhou but also from 2nd-3rd tier cities, according to “China Beyond,” a new study released today by Ogilvy China. Moreover, what works in big cities for marketing firms and brands may not work in the 4th-6th tier locales which range from prefecture level cities to county level towns. Nevertheless, a vast opportunity exists for companies that can tap into local and regional psyches and lifestyles.

The pace of development is amplified by the anxious youth and their relationship with technology. Most young people, though optimistic about the future, do not know how to use the Internet for information, education and better opportunities. Their online behavior mirrors the lackluster, drab realities of a provincial life. Brands that are able to redirect some of the pent-up energy to fuel entrepreneurship, creativity and consumerism are likely to benefit.

Families in small towns usually have two children, and their sphere of influence is arguably larger than that of the pampered big city child. This social reality offers many opportunities for marketers to become more relevant to consumers by helping to create a better future for children. They also need to be cognizant of the influence an older sibling can have on the behavior of the younger child. At the same time, there is relatively less pressure exerted upon children – since all the family’s hopes do not rest on that one child.

There is a natural affinity with open spaces. In low tier cities, many engagements and interactions happen in public. This is contrary to urban people living in closed quarters, with limited capacity and range for activities. It demonstrates that brands must communicate with consumers on the move.

For instance, the hang out culture in lower tier cities means outdoor media can be used to engage rather than simply inform. Brands could tell more ’stories’ rather than a ’short message’ or ‘one key visual’. Brands could help people to hang out together in places they naturally tend to converge to. Food and beverage brands could bring people together with make-shift stools, tables and fixed umbrellas as premia.

Counterfeit brands have taken off in low tier cities as consumers desire brands that symbolize success but are unable to buy the real brands due to vast income gaps. As a result, fake FMCG and consumer durables brands are widely available in China’s lower tier cities – a different phenomenon from what is seen in the big cities where luxury brand fakes proliferate.

Mom-and-pop stores and wet markets are being pushed out while hypermarkets and open-shelf convenience stores are taking over. However, these stores stock far more local and national Chinese brands than international brands. There is also a strong appetite for “new things,” which means consumers easily tire of old brands that do not constantly change and innovate.

All good stuff for the business-minded amongst you that aren’t still enamored by Shanghai and Beijing or Hangzhou and Chongqing or…yeah. Read the rest at Ogilvy »

A business opportunities for those who want to bring down Big Tobacco…sorta…

From Slate (via Danwei) comes this eye-opening and lung-blackening expose of China’s incredibly lucrative and equally shady counterfeit cigarette industry. Barring a few potentially inaccurate factoids slipped in for extra flavor, the article will not only make you question every fag you light up, it might also tempt you into the trade. Yikes. Here’s a juicy appetizer:

Ringed by thickly forested mountains, illicit cigarette factories dot the countryside, carved deeply into caves, high into the hills, and even buried beneath the earth. By one tally, some 200 operations are hidden in Yunxiao, a southwestern Fujian county about twice the area of New York City. Over the last 10 years, production of counterfeit cigarettes has soared in China, jumping eightfold since 1997 to an unprecedented 400 billion cigarettes a year—enough to supply every U.S. smoker with 460 packs a year. Once famed for its bright yellow loquat fruit, Yunxiao is the trade’s heartland, the source of half of China’s counterfeit production.

Today, China’s fake cigarettes—knockoff Marlboros, Newports, and Benson & Hedges—are flooding markets around the globe. They fuel a violent, multibillion-dollar black market and are even more hazardous to smokers than the real thing, yet the industry is little-known.

“Most factories are underground,” a Yunxiao cigarette broker confided in hushed tones. “They’re under buildings, unimaginably well-hidden, with secret doors from the basements.” Even the village temple—topped with an arched red roof and twisting, frescoed spires—conceals a factory below, she said.

Cigarette counterfeiting is immensely lucrative, with profits easily rivaling those of the narcotics trade. While a pack of fake Marlboros costs 20 cents to make in China, it can fetch up to 20 times that amount in the United States. And though a drug trafficker might land a life sentence if caught, a cigarette counterfeiter usually receives a comparative slap on the wrist—a handful of years in jail or possibly a fine.

Already drawing pro vs. con, risk vs. benefit tables? Read the rest at Slate »

Chinese government officials overseeing the destruction of counterfeit cigarettes.

An interesting suggestion in the above article is that the Chinese central government has a “strong motive” for cracking down on these counterfeit cigarettes. This is premised upon the state having a monopoly on the legal manufacture and distribution of cigarettes, whose revenues apparently contribute “nearly 8 percent of China’s budget”. Part of me, however, isn’t so sure the government is that strongly motivated, but perhaps that may rest on differences of interests between the central and local/provincial levels of government. Even so, I can imagine implicitly allowing this sort of counterfeiting to continue simply because it brings a measure of economic growth to China. Think about it, counterfeit cigarettes not only employ unskilled masses, they’re also a huge export industry, and they appease the masses’ desire for cheap “name-brand” goods for some semblance of first-world consumption standards. Oh, and Deng would be proud: Some get rich first too.

It seemed like a no-brainer idea to me. What better subject to blog about than advertisements, right? Their very nature usually involves eye-catching pictures and interesting ideas! Both are key to grabbing people’s attention and keeping their interest! I thought to myself, a well-done blog on interesting Chinese advertising would surely attract tons of readers, not just those involved in advertising but the mainstream audience as well.

So, I recently hunted down LRB’s founder and mastermind, Rand Han, for an interview. He obliged and shared his insights into advertising in China, the evolution of LRB, and how he’s using internet social media to promote his businesses:

CNR: Rand, tell us about yourself, who you are, where you’re from, and what you do.

Rand: I’m Chinese-American, born in California. I’ve worked in several big agencies before starting BA360, my boutique ad agency; this was done initially with copywriting clients, then reinvesting commissions allowing me to organically build the company from nothing. I created LRB late last year as an alternative advertising method to Google AdWords; as with AdWords, you pay a lot, and when you stop the campaign, its done… but with LRB, we spend a lot of time, but that effort never goes away, and only builds on itself over time. Strategically, building LRB was a smart move… though at 4 months old, LRB doesn’t outpull AdWords for leads – though I’m optimistic that after a year it will, and the quality of the leads/business partnerships will be far greater.

CNR: When I first visited LRB, I was instantly attracted to the subject matter, and thought LRB would easily appeal to the mainstream audience. Tell us a bit about your thoughts on LRB’s subject-matter, beyond it being a natural complement to your boutique ad agency.

Yeah, you’d think that blogging about ads in china would be interesting; but its a bit harder than it looks. When you blog about advertising overseas (adsoftheworld.com; frederiksamuel.com/blog) the ads really speak for themselves. In China though, you need to explain an otherwise dull ad in a cultural context, allowing western readers to understand it.

I’ve always had a belief that you can tell a lot about any given culture by that culture’s advertising; cause what is advertising anyway? It’s businessmen spending HUGE amounts of money trying to communicate about their products in a culturally relevant way to the buyer. These businessmen run focus groups, research studies, etc. ad infinitum. This leads to the idea that by studying China advertising, we can begin tracing back the business logic to uncover modern China advertising/marketing/cultural insights.

CNR: Going back to you mentioning that LRB was set up as an alternative to Google AdWords for BA360, what is the relationship between the two?

Rand: LRB was originally going to be BA’s blog, but since LRB covers creative from other ad agencies, and stories/content that don’t relate to BA’s service offering, we figured to separate LRB from the BA brand. BA360 does have a blog, but it’s embarrassingly out of date, since most time is spent focused on LRB (in fact the last post on BA’s blog is a link to LRB). Generally, you can think of LRB being BA360, but with the freedom of not being restricted to the BA360 brand.

CNR: Since you’re the big cheese behind it all, how would you most accurately characterize yourself and your efforts with LRB? As a blogger blogging, an entrepreneur developing a business, or a business owner further marketing his brand?

Rand: LRB was originally about building my company, BA360. However, it seems to have built my personal “Rand” brand more than that the company brand, which is fine, as it’s all connected. The strategic intention is to consistently funnel targeted traffic on China advertising and marketing through the blog, and then fish for new business through implication/association (ie: various BA360 branding scattered through the site along with contributor bios referencing BA). It’s a soft sell, we lead with info that is interesting to readers – but always want to remind them that we’re here to serve beyond the articles.

The BA360 website. The kid? That's Rand...probably.

CNR: Recently, you’ve redesigned and piled on a lot of new social media features, sections, or spin-offs to LRB, including Blog Aggregator and Social Network. All of this has led me to characterize LRB as something of an aspiring “advertising media portal.” What are your plans and goals for LRB (or BA360)?

Rand: Yes, you are correct with the “China advertising portal” goal. One of the main challenges with social media I find is optimizing the value of generated traffic. My off-the-cuff-2.0 answer to this is to create other complements that will help retain some of the traffic and encourage interaction/retention.

CNR: With the exception of Sherry and her previous City Snapshot posts, I’ve noticed two new contributors, VeronicaYinise. So now the peon has underlings of his own, eh? Tell us a little about these new personalities and, if they haven’t been misbehaving, feel free to give them a little love here. and

Rand: Veronica and Yinise will be joined by Vance soon; they are all interns at LRB. Finding good stuff isn’t easy, and as you mentioned before, my initial posts in December were inconsistent. This is mainly because I’m juggling finding/writing content along with developing/pitching new clients, directing the design advertising and websites for current clients, building LRB, plus other in-house projects. To remedy this, I hired a bunch of interns over the last few months (Veronica and Yinise are the newest) to search for content online. One of my primary aims with anything I do is to pass it on to others to execute, so I’m in the process of training Sherry, Veronica, and Yinise to find good content and write and post it up themselves, though I still write most headlines. By seeing the results from their efforts viscerally, it motivates them to build their skills.

CNR: In the context of LRB being an advertising blog that helps promote BA360 the marketing agency, I understood the advertising case studies and City Snapshot posts, but I’m having a hard time understanding how the recent chinaSMACK-esque posts fit into the big picture. Are you expanding the subject-matter scope for LRB and why?

Rand: chinaSMACK traffic stats are amazing when you consider the amount of work put into the articles. In one day, Sherry found several great articles, translated them, and posted them up, and we experienced a significant traffic spike, so the simple answer is: lots of traffic / little effort.

When you look at the Google/Baidu entry, or any other good entry on LRB, they take a lot of time, and thinking, and analysis. Whereas with using chinaSMACK-ish articles, you really only need the ability to read Chinese, surf the Chinese web, and a bent sense of humor.

However, it does tie into LRB, albeit distantly. I always liked chinaSMACK for its translations of Chinese comments, or its “chinese people’s secrets” translations because it lends insight into how the modern Chinese think. A lot of times when we look at articles in China, we see this whole “Asia mystery” thing to it. That’s nice and all, but ultimately misleading. By translating comments from Chinese on LRB as it relates to interesting cultural stories, we’re also giving readers an idea of how Chinese people really are, to a certain extent. You can argue this is good content for marketers trying to figure out China, and who are looking for analysis beyond BA360′s perhaps biased opinion.

Additionally, by mixing in CS-ish articles with LRB’s normal fare, we can quickly build more traffic and awareness; which feeds the previous strategies mentioned.

CNR: As an advertising and marketing man in China who may be aspiring to be the next Tom Doctoroff, what are the top three things you think people should note about Chinese advertising and marketing?

Rand: I don’t assume to be anywhere near Tom Doctoroff’s level; if he were an opera singer, I’d be the guy singing dirty limericks on the street.

I can say a lot about advertising in China, but for the sake of brevity, I’ll just say this: Advertising in China is significantly different than advertising elsewhere; the message needs to be relevant on a local level. Yeah, that seems glaringly obvious, but too many times I see clients try to bring their brand culture into China, and it can be frustrating balancing client brand needs against Chinese cultural interests.

CNR: Do you follow any other English China blogs or websites? Which, if any, do you strongly recommend for anyone interested in China or the Chinese?

Rand: I follow a lot, you can check LRB’s media aggregator for a short list.

Rand is a bit camera shy, but if you’re craving more Randtasticness, visit his China Advertising and Marketing Insight blog at littleredbook or his boutique agency at BA360.

Ever since chinaSMACK popped onto the English China blog scene with its regular translations of popular and quirky (if not outright scandalous) news and phenomena from China’s ever-vibrant and ever-teeming BBS discussion forums, more and more other English China blogs have begun copying their formula.

To be sure, chinaSMACK wasn’t the first (nor the last) to succeed in the niche of what it calls “cultural voyeurism,” offering insights into China’s modern society and culture through translations of original Chinese material. Both EastSouthWestNorth and Global Voices Online preceded chinaSMACK, the former translating mountains of Chinese news articles and the latter regularly translating Chinese netizen comments to contentious and often political issues as they appeared on China’s internet.

However, chinaSMACK is arguably the first English-language blog about China to really position and promote itself as featuring (and only featuring) translated Chinese internet pop-culture phenomena, putting the thoughts and comments of actual Chinese netizens front and center. This contrasted starkly if not refreshingly against the majority of English China blogs dominated by the personal (and often political) commentary of the “Western” expats that operated them. By translating, offering context as needed, and even supplying a glossary for common Chinese internet slang and memes all in one place, chinaSMACK made Chinese commentary of China accessible, and you were more or less left to draw your own conclusions.

Growth and Success

By most accounts, chinaSMACK has been very successful, itself citing an average of 7000 visitors per day. Alexa, Compete, and Quantcast all show chinaSMACK’s growth and healthy traffic, despite all of them being flawed in their own ways (i.e. Compete doesn’t measure traffic from outside the United States).

Mind you, it isn’t YouTube, but these are pretty damn good numbers for a niche blog about China. The only other major English China blogs with more traffic are Danwei and Shanghaiist. However, both have been around for years, whereas chinaSMACK has only been online for a prepubescent nine months. Furthermore, chinaSMACK boasts a healthy community of commenters, with each post now easily garnering 50, 100, or hundreds of comments.

Changing The Game

So is this sort of success motivating other English China blogs to expend the effort in directly translating Chinese source material, including Chinese netizen comments from the depths of China’s popular discussion forums? Has there been a shift in English blogging about China?

Having long watched and subscribed to many English China blogs, I certainly have noticed so. A lot more content on English China blogs these days are being sourced directly from China’s news portals and discussion forums by an increasing amount of blogs, so long as their authors can read the Chinese.

One notable example: Shanghaiist. Despite its namesake, Shanghaiist is something of an aggregator of news for not just Shanghai but all around China. If you look through their archives, you’ll notice that they typically derived most of their past content from the Western news media (WSJ, New York Times) or portals (i.e. Yahoo News), official Chinese news media sources (i.e. Xinhua, China Daily), or other smaller English China blogs. Yet, starting from this past January, we suddenly saw a lot more posts from Chinese news portals and discussion forums, particularly Netease.

However, the most telling signs of chinaSMACK’s influence upon the English China blogosphere comes from the flattering imitations of…

China Digital Times, an exhaustive American aggregator of all China news inconveniently blocked in China:

• A Satire That Caused an Uproar in Both China and The Philippines
• For Sale: One Life in China
• Official Sacked for Overseas Trip, with Netizens’ Reactions
• Persian Xiaozhao: My First “Tea” Experience (Part V) (With Comments)
• Persian Xiaozhao: We Are in This Together
• “Erroneous” Western Democracy Not For China, Says Official (Updated with Bloggers’ Reactions)

ChinaGeeks, a well-written blog that was recently redesigned and starting to make a name for itself:

• On Dating Foreigners and Penis Size
• Thoughts on the New Healthcare Proposal
• Do Chinese People Only Listen to Foreigners?

And the most recent example who today just threw up its first two posts translating Chinese discussion forum mischief?

littleredbook.cn, an aspirational China advertising media portal that combines 1 part business portfolio, 1 part blog, 1 part psuedo-Alltop, 1 part Ning social network, all mixed with a generous squeeze of good design and poured into four shot glasses:

• Visa; Going out to dinner with China, Hong Kong, and Taiwan; Chinese netizens react to politically charged ad
• Chinese netizens respond to ladyboys publicly crying for help in southern China.

Yeah, I’m not sure why an advertising blog is posting about Chinese netizen reactions to transsexuals either.

All of this is absolutely fantastic to any China-watcher who wants to get a broader, deeper, or better idea of what is going on in China amongst the Chinese themselves (as opposed to Western journalists and expats). Tons of stuff are either happening on or being reported on Chinese discussion forums that escape the notice of the vast majority of major English-language media simply because they cannot read the Chinese language. The more people who can translate this stuff, the more everyone benefits from an expanding coverage of China and its denizens.

The Challenges Ahead

But here’s the problem for chinaSMACK: The one thing that made it unique and fresh is now being commoditized. As such, it risks being overshadowed, crowded out, or outright replaced. Sure, it may be inherently male of me to say this but if chinaSMACK wants to remain the standard-bearer, in the niche of translating Chinese netizen pop-culture for the consumption of the voyeuristic English-reading masses, it needs to step up its efforts.  There are only so many people interested in reading informative or entertaining content about China with only so much time each day. Does chinaSMACK want to remain the one website, the one name, the one brand that these people will think of and recommend to future China neophytes?

chinaSMACK has benefited from and increasing global interest in China. That same increasing global interest is also what is attracting a new crop of well-written, well-designed, competitive blogs with more contributors, more content, and possibly more funding than a single girl by her lonesome tip-tapping away at the keyboard somewhere in Shanghai, translating what piques her interest that day from the Chinese discussion forums. Understandably, translating Chinese into English is an extremely labor-intensive proposition, but chinaSMACK needs more than one post a day, and the stream of content and activity simply cannot stop just because the founder is sick. It needs its contributors to do more, or it needs more contributors. It needs a better hosting plan.

chinaSMACK was onto something good, but it cannot afford to rest on its laurels, especially if other websites are taking hints from its playbook. There’s an appetite, if not hunger, for what chinaSMACK offers, but it just isn’t serving it up fast enough to satisfy demand. Far greater success with far greater rewards lie in overcoming these challenges. I hope chinaSMACK is up for it because I want to see it succeed.

There’s probably a good motivational story in it.